The Buyer and the Supplier, The Cash Rich and Cash Poor, On Time and Past Due, With or Without Payment Terms, In Boom Times and During Recessions...
You have to Process Your Invoices.
Rickie Crane, accounts payable manager for Sharq Industrial, Residential and Trucking Services (SHIRT for short), sat alone in her office, preparing for the annual half-day meeting with her invoice processing staff. Hers was a large group: 68 people handling the processing of paper invoices that flowed into the SHIRT AP department. Last year, the group set a new benchmark for productivity, exceeding 2,500 annual invoices processed per FTE. This year she was determined to cross the 3,000 mark. The potential for increasing staff productivity by more than 20% in one year filled her with excitement.
At SHIRT AP, the first productivity breakthrough for her team occurred last year. The driver was a scanning/Optical Character Recognition system that had pushed annual invoice processing productivity past the 1000/FTE mark per year. That and the talents of Burt Zerk. Zerk, a SHIRT IT employee who had been laid off, was brought into the AP department to master the OCR technology, which could transform data on a paper invoice into an electronic format for processing. He was the star of the team. With Zerk on board, straight-through processing of OCR invoices soared to 47%, nearly double the previous rate.
With that success behind her, Crane was ready for the next advance. She opened her near final draft of the slides that she was preparing for her annual meeting keynote presentation when a woman burst into her office. It was CFO Allie Greenspan’s executive assistance. “Allie asked me to give this to you,” she said, delivering a one-page memo, then left Crane’s office. Rickie stared at the memo. At the top, in boldface, read the title line: “Moving Toward a Networked Enterprise: SHIRT Finance Strategy for 2012.”
Rickie stood up, memo in hand, and began pacing as she read. She couldn’t believe her eyes. The company had completed a benchmark of its operations, and compared it with other companies of its size. According to the results, SHIRT was a laggard. Its processing costs and AP staff size were among the highest of its peer group, while its straight-through processing rates were among the lowest. Leading companies were achieving new levels of business performance by becoming what was called a “networked enterprise.” In response, Allie would be calling a meeting with the accounts payable group in two days to discuss the new SHIRT. The company was going electronic.
When Rickie finished reading the memo, she plopped back into in her chair, and stared into space for about 30 seconds. Breaking out of her trance, she picked up her phone and dialed Extension 477. When Burt Zerk answered the phone, she told him to stop what he was doing. “Come over to my office,” she commanded. “I need to speak with you right away.”
(NEXT WEEK: Ally Greenspan plots his corporate finance strategy.)